REDWOOD MORTGAGE INVESTORS VII

                       (a California Limited Partnership)

                               Index to Form 10-K

                                December 31, 1999

                                     Part I

                                                                        Page No.
Item 1 - Business                                                              3
Item 2 - Properties                                                          4-5
Item 3 - Legal Proceedings                                                     6
Item 4 - Submission of Matters to a vote of Security
         Holders (partners)                                                    6

                                     Part II

Item 5 - Market for the Registrant's Partners' Capital and related
         matters                                                               6
Item 6 - Selected Financial Data                                             6-8
Item 7 - Management's Discussion and Analysis of Financial condition
         and Results of Operations                                          9-13
Item 8 - Financial Statements and Supplementary Data                       14-37
Item 9 - Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure                                             38

                                    Part III

Item 10 - Directors and Executive Officers of the Registrant                  38
Item 11 - Executive Compensation                                              39
Item 12 - Security Ownership of Certain Beneficial Owners and management      40
Item 13 - Certain Relationships and Related Transactions                      40

                                     Part IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports
          on Form 8- K.                                                    40-41

Signatures                                                                    42



<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    Form 10-K

                Annual Report Pursuant to Section 13 or 15 (d) of

                       the Securities Exchange Act of 1934

      For the year ended December 31, 1999 Commission file number 33-30427
--------------------------------------------------------------------------------

    REDWOOD MORTGAGE INVESTORS VII (Exact name of registrant as specified in
                                  its charter)
    California                                                       94-3094928
--------------------------------------------------------------------------------
(State or other jurisdiction of                 (I.R.S. Employer Identification)
incorporation or organization)

650 El Camino Real Suite G, Redwood City, CA                          94063
--------------------------------------------------------------------------------
(address of principal executive offices)                           (zip code)

Registrant's telephone No. including area code                    (650) 365-5341
--------------------------------------------------------------------------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                    Name of each exchange on which registered
--------------------------------------------------------------------------------
Limited Partnership Units                                        None

--------------------------------------------------------------------------------

Securities registered pursuant to Section 12(g)
   of the Act:                                     Limited Partnership Interests

Indicate by check mark  whether the  registrant  (1) has filed all reports to be
filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of  1934  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

YES         XXXX                                                NO
----------------------                                    ------------------

Through  December  31,  1992,  the  limited   partnership   units  purchased  by
non-affiliates  was 119,983.59 units computed at $100.00 a unit for $11,998,359.
The offering was closed on September 30, 1992.

Documents incorporated by reference:

Portions of the  Prospectus  dated  October 20, 1989,  and  Supplement  #5 dated
February 14, 1992,  filed on form S-11, are  incorporated  in Parts II, III, and
IV.  Exhibits filed as part of Form S-11  Registration  Statement  #33-30427 are
referenced in part IV.


<PAGE>



                                     Part I

Item 1 - Business

Redwood  Mortgage   Investors  VII,  a  California   limited   partnership  (the
"Partnership"),  was organized in 1989 of which D. Russell  Burwell,  Michael R.
Burwell  and  Gymno  Corporation,  a  California  corporation,  are the  General
Partners.  The address of the  Partnership  and the  General  Partners is 650 El
Camino  Real,  Suite G, Redwood  City,  California  94063.  The  Partnership  is
organized to engage in business as a mortgage lender, for the primary purpose of
making Mortgage Investments secured by deeds of trust on California real estate.
Mortgage  Investments  are arranged and serviced by Redwood  Mortgage  Corp., an
affiliate of the General  Partners.  The  Partnership's  objectives  are to make
investments,  as referred to above, which will: (i) provide the maximum possible
cash  returns  which  Limited  Partners  may elect to (a)  receive  as  monthly,
quarterly or annual cash  distributions  or (b) have  credited to their  capital
accounts and applied to  Partnership  activities;  and (ii) preserve and protect
the  Partnership's  capital.  The  Partnership's  general business is more fully
described under the section entitled "Investment  Objectives and Criteria" pages
26-31 of the Prospectus which is incorporated by reference.

Originally,  60,000  Units  were  offered  on a  "best  efforts"  basis  through
broker/dealer member firms of the National Association of Security Dealers, Inc.
In accordance with the terms of the Prospectus,  the General Partners  increased
the number of units for sale from 60,000 to 120,000 and elected to continue  the
offering until  September 30, 1992.  The offering  closed on September 30, 1992,
and the Limited Partners contributed capital totalled $11,998,359 of an approved
$12,000,000  issue,  in units of $100 each. At that date all the  applicants had
been admitted into the Partnership with none left in the applicant  status.  The
final SR report (Report of Sales of Securities  and use of proceeds  therefrom),
was filed on September 21, 1992.

The  Partnership  began  selling units in October,  1989 and began  investing in
mortgages in December, 1989. At December 31, 1999, the Partnership had a balance
in its Mortgage Investments  portfolio totalling $11,011,660 with interest rates
thereon ranging from 6.50% to 18.00%.

Currently,  Mortgage Investments secured by First Trust Deeds comprise 55.19% of
the amount of funds in the  Mortgage  Investment  portfolio  followed  by Second
Trust  Deeds of 38.80% and Third  Trust  Deeds of 6.01%.  Owner-occupied  homes,
combined with non-owner occupied homes total 24.41% of the Mortgage Investments.
Commercial  Mortgage  Investments  origination  decreased  from last  year,  now
comprising  73.93% of the  portfolio,  a decrease of 1.78%.  Loans to apartments
totaled 1.66%.  The past year brought many outstanding low loan to value lending
opportunities  in the  commercial  segment  of the  market.  63.32% of the total
Mortgage  Investments,  are in six  counties  of the Bay  Area.  The  County  of
Stanislaus makes up 25.66% of the Mortgage Investments.  Stanislaus County is an
adjacent county to the San Francisco Bay Area,  located  approximately  65 miles
from San  Francisco.  The  balance of  Mortgage  Investments  are  primarily  in
Northern  California.  Mortgage Investment size increased this past year, and is
now averaging $262,182 per Mortgage Investment,  an increase of $12,952. Some of
the  larger   Mortgage   Investments   invested  in  by  the   Partnership   are
fractionalized between other affiliated  partnerships with objectives similar to
those of the  Partnership  to  further  reduce  risk.  Average  equity  per loan
transaction  stood at  37.58%.  A 40%  equity  average  on loan  origination  is
generally  considered very  conservative.  Generally,  the more equity, the more
protection for the lender. The Partnership's Mortgage Investment portfolio is in
good condition with only one property in foreclosure as of December, 1999.


<PAGE>



Item 2 - Properties

A summary of the Partnership's  Mortgage Investment Portfolio as of December 31,
1999 is set forth below.

Mortgage Investments as a Percentage of Total Mortgage Investments

First Trust Deeds                                                  $6,077,532.10
Appraised Value of Properties                                      10,228,718.00
  Total Investment as a % of Appraisal                                    59.42%
First Trust Deeds                                                  $6,077,532.10
Second Trust Deed Mortgage Investments                              4,272,714.56
Third Trust Deed Mortgage Investments                                 661,413.71
                                                             -------------------
                                                             -------------------
                                                                   11,011,660.37

First Trust Deeds due other Lenders                                 8,620,674.00
Second Trust Deeds due other Lenders                                1,768,559.00

Total Debt                                                        $21,400,893.37

  Appraised Property Value                                        $34,223,193.00
  Total Investments as a % of Appraisal                                   62.53%

Number of Mortgage Investments Outstanding                                    42

Average Investment                                                    262,182.39
Average Investment as a % of Net Assets                                    2.38%
Largest Investment Outstanding                                      1,500,000.00
Largest Investment as a % of Net Assets                                   13.62%

Mortgage Investments as a Percentage of Total Mortgage Investments

First Trust Deeds                                                         55.19%
Second Trust Deeds                                                        38.80%
Third Trust Deeds                                                          6.01%
                                                             -------------------
                                                             -------------------
Total                                                                    100.00%

Mortgage Investments  by                  Amount             Percent
Type of Property

Owner Occupied Homes                      $340,863.95             3.09%
Non-Owner Occupied Homes                 2,347,394.44            21.32%
Apartments                                 182.674.45             1.66%
Commercial                               8,140,727.53            73.93%
                                     -----------------       -----------

Total                                  $11,011,660.37           100.00%




<PAGE>


The  following  is a  distribution  of Mortgage  Investments  outstanding  as of
December 31, 1999 by Counties.

County                            Total Mortgage              Percent
                                    Investments

San Mateo                            $2,950,790.20             26.80%
Stanislaus                            2,825,822.45             25.66%
San Francisco                         1,359,061.49             12.34%
Contra Costa                          1,325,498.54             12.04%
Alameda                                 720,782.04              6.54%
Santa Clara                             616,969.92              5.60%
Santa Cruz                              522,217.74              4.74%
Placer                                  328,881.51              2.99%
Sonoma                                  158,672.03              1.44%
Sacramento                               96,716.11              0.88%
Shasta                                   80,248.34              0.73%
Ventura                                  26,000.00              0.24%
                                 ------------------       ------------
                                 ------------------       ------------

Total                               $11,011,660.37            100.00%


Statement of Condition of Mortgage Investments

Number of Mortgage Investments in Foreclosure                     -1-

Scheduled maturity dates of mortgage  investments as of December 31, 1999 are as
follows:

                         Year Ending
                         December 31,

                      -------------------

                             2000                                     $4,734,685
                             2001                                      5,013,881
                             2002                                        263,535
                             2003                                         63,983
                             2004                                        146,616
                          Thereafter                                     788,960
                                                                ----------------
                                                                     $11,011,660

                                                                ================

The  scheduled  maturities  for 2000 include  approximately  $1,481,528  in nine
mortgage  investments  which are past  maturity at December 31,  1999.  Interest
payments  on most of  these  loans  are  current.  $912,875  of  these  Mortgage
Investments were categorized as delinquent over 90 days.

Six Mortgage  Investments  with principals  outstanding of $964,224 had interest
payments overdue in excess of 90 days.

Six  Mortgage  Investments  with  principals   outstanding  of  $1,099,474  were
considered  impaired at December  31,  1999.  That is interest  accruals  are no
longer recorded thereon.


<PAGE>


Item 3 - Legal Proceedings

In the normal course of business the  Partnership may become involved in various
types of legal proceedings such as assignments of rents, bankruptcy proceedings,
appointments of receivers, unlawful detainers,  judicial foreclosures,  etc., to
enforce the  provisions  of the deeds of trust,  collect the debt owed under the
promissory  notes or to  protect/recoup  its  investment  from the real property
secured by the deeds. As of the date hereof,  the Partnership is not involved in
any legal  proceedings  other than those  that would be  considered  part of the
normal course of business.  Management  anticipates  that the ultimate result of
these  cases  will not have a material  adverse  effect on the net assets of the
Partnership,  with  due  consideration  having  been  given in  arriving  at the
allowance for doubtful  accounts.  Also refer to a more precise discussion under
Note 6 of the Financial Statements on Page 27 of this report.

Item 4 - Submission of matters to vote of Security Holders (Partners).

No matters have been submitted to a vote of the Partnership.

                                     Part II

Item 5 - Market for the Registrant's Units and Related Partnership Matters.

120,000 units at $100 each (minimum 20 units) were offered through broker-dealer
member  firms of the  National  Association  of  Securities  Dealers  on a "best
efforts"  basis (as  indicated in Part I item 1).  Investors  have the option of
withdrawing earnings on a monthly, quarterly, or annual basis or reinvesting and
compounding the earnings.  Limited Partners may withdraw from the Partnership in
accordance with the terms of the Partnership Agreement subject to possible early
withdrawal penalties. There is no established public trading market.

A description of the Partnership  units,  transfer  restrictions  and withdrawal
provisions is more fully  described under the section  entitled  "Description of
Units"  and  summary  of Limited  Partnership  Agreement,  pages 47 to 50 of the
Prospectus,   a  part  of  the  referenced  Registration  Statement,   which  is
incorporated by reference.

Item 6 - Selected Financial Data

Redwood  Mortgage  Investors VII began  operations in December  1989.  Financial
results  for  years  1984 to 1989 for prior  partnerships  are  incorporated  by
reference to the  Prospectus  (S-11) dated  October 20, 1989,  Table III pages 7
through  11 and  Supplement  No. 3 dated  October  2, 1990 to  Prospectus  dated
October 20, 1989, Table III pages 27 through 33.


<PAGE>



Financial condition and results of operation for the Partnership for three years
to December 31, 1999 were:

<TABLE>
                                           Balance Sheet

                                                Assets

                                                                           December 31,
                                                       ------------------------------------------------------

<S>                                                              <C>                  <C>                 <C>
                                                                 1999                 1998                1997
                                                       ---------------      ---------------      --------------
Cash                                                         $388,770             $461,544            $520,837
Accounts Receivable:
   Mortgage Investments secured by Deeds of Trust          11,011,660           13,209,186          13,449,741
   Accrued interest and other fees                            357,177              442,350             427,952
   Advances on Mortgage Investments                            31,669               39,733              33,154
   Other receivables - Unsecured                              163,085              242,493             252,422
   Less allowance for losses                                (828,563)            (787,042)           (424,738)
Real Estate Owned acquired through foreclosure at
    estimated net realizable value                            307,931              397,396             687,139
Partnership Interest                                                0                    0             346,017
Real Estate Owned in Process                                  525,510                    0                   0

                                                       ---------------      ---------------      --------------
                                                          $11,957,239          $14,005,660         $15,292,524
                                                       ---------------      ---------------      --------------



</TABLE>
<PAGE>
<TABLE>


                                    Liabilities and Partners Capital

                                                                           December 31,
                                                       ------------------------------------------------------

<S>                                                              <C>                 <C>                <C>
                                                                 1999                1998               1997
                                                       ---------------     --------------     ---------------
Liabilities:
Note payable - Bank                                          $800,000          $1,912,663         $2,341,816
Accounts payable and accrued expenses                          32,234              12,547              1,845
Deferred Interest                                             115,709             131,743             69,316
                                                       ---------------     ---------------     --------------
                                                              947,943           2,056,953          2,412,977

Partners' Capital:
  General Partners                                             11,978              11,978             11,978
  Limited Partners subject to redemption                   10,997,318          11,936,729         12,867,569
                                                       ---------------     ---------------     --------------
     Total Partners Capital                                11,009,296          11,948,707         12,879,547
                                                       ---------------     ---------------     --------------


                                                          $11,957,239         $14,005,660         $2,341,816
                                                       ---------------     ---------------     --------------


                               Statement of Income

Gross revenue                                              $1,663,245          $1,657,728          $1,623,863
Expenses                                                      753,664             811,157             796,984
                                                       ---------------     ---------------      --------------


Net Income                                                    909,581             846,571            $826,879
                                                       ---------------     ---------------      --------------

Net income to General Partners (1%)                             9,096               8,466              $8,269
                                                       ===============     ===============      ==============

Net Income to Limited Partners (99%)                          900,485             838,105            $818,610
                                                       ===============     ===============      ==============


Net Income per $1,000 invested by Limited Partners for entire period:

   - where income is reinvested and compounded                    $79                 $67                 $61
                                                       ===============     ===============      ==============

   - where partner receives income in monthly
       distributions                                              $76                 $65                 $59
                                                       ===============     ===============      ==============

</TABLE>

Net  income in 1997  averaged  at an  annualized  yield of 6.10%.  In 1998,  the
annualized yield was 6.69% and in 1999 the annualized  yield was 7.86%.  Average
annualized yield since inception through December 31, 1999, was 7.75%.


<PAGE>


ITEM 7  -    MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------      ---------------------------------------------------------
                            AND RESULTS OF OPERATIONS

On  September  30,  1992,  the  Partnership  had sold  119,983.59  units and its
contributed  capital totaled  $11,998,359 of the approved  $12,000,000 issue, in
units of $100 each.  As of that date,  the  offering  was  formally  closed.  At
December 31, 1999, Partners' Capital totaled $11,009,296.

At December 31, 1999, the Partnership Mortgage Investments  outstanding totalled
$11,011,660.  This represents a decline of $2,197,526 from the December 31, 1998
Mortgage Investments balance. This reduction in Mortgage Investments outstanding
as of  December  31,  1999  was  chiefly  due to  cash  proceeds  from  Mortgage
Investment  repayments being used to fund withdrawals to the Limited Partners of
$1,927,783,  and a  decrease  in Note  Payable-Bank  of  $1,112,663,  offset  by
reinvestment  of earnings of $409,644,  funds generated from a reduction of real
estate owned ($89,465),  reduction in accrued  interest,  other  receivables and
investment  of  cash.  To a  certain  extent,  the  reduction  was  also  due to
significant  loan pay-offs  towards the latter part of 1999.  The ability of the
Partnership  to invest in new  Mortgage  Investments  during 1999 was  partially
offset by  withdrawals  of income and  capital by the  Partners in the amount of
$1,927,783 including early withdrawal penalties.  Mortgage investments decreased
from  $13,449,741  from 1997 to  $13,209,186  in 1998,  a decrease  of  $240,555
chiefly  due to the ability of the  General  Partners to reduce  amounts of real
estate owned by $289,743, convert it's partnership interest to cash of $346,017,
reinvestment of earnings of $390,213.  offset by payments to withdrawing Limited
Partners  $1,856,833,  a  reduction  of  outstanding  Note  Payable  -  Bank  of
$1,112,663  and  investment of cash.  The  Partnership  began  funding  Mortgage
Investments  on December 27, 1989, and as of December 31, 1999, had credited the
Partners  accounts with income at an average  annualized  (compounded)  yield of
7.75%.

Since the Fall of 1999,  mortgage  interest rates have been rising due primarily
to economic  forces and by the Federal  Reserve raising its core interest rates.
New Mortgage Investments will be originated at higher interest rates which could
increase the average return across the entire Mortgage Investment portfolio held
by the Partnership.  In the future, interest rates likely will change from their
current levels.  The General Partners cannot at this time predict at what levels
interest  rates  will  be in the  future.  Although  the  rates  charged  by the
Partnership  are  influenced by the level of interest  rates in the market,  the
General  Partners do not anticipate that rates charged by the Partnership to its
borrowers will change  significantly from the beginning of 2000 over the next 12
months.  As of December 31, 1999 the  Partnership  Real Estate Owned account and
the investment in Partnership account have been reduced to a combined balance of
$307,931.  These  accounts had combined  balances of $1,033,156 and $397,396 for
the years ended  December 31, 1997 and 1998,  respectively.  The  conversion  of
these  non-earning  assets to income  producing  assets will generate  increased
income.  The overall effect of these  developments will allow the Partnership to
increase the annualized  yields paid by the Partnership in future quarters.  The
General  Partners  anticipate that the annualized yield for the coming new year,
2000, will be higher than the previous year.

The  Partnership  has a line of credit  with a  commercial  bank  secured by its
Mortgage  Investments to a limit of $3,500,000,  at a variable interest rate set
at one half percent above the prime rate. As of December 31, 1999,  December 31,
1998  and  December  31,  1997,  the  balances  were  $800,000,  $1,912,663  and
$2,341,816,  respectively.  This line of credit  expires on May 01,  2003.  This
added source of funds helped in maximizing the Partnership yield by allowing the
Partnership to minimize the amount of funds in lower yield  investment  accounts
when appropriate Mortgage Investments are not currently available. Since most of
the Mortgage  Investments  made by the  Partnership  bear  interest at a rate in
excess of the rate payable to the bank which  extended the line of credit,  once
the required  principal and interest  payments on the line of credit are paid to
the bank,  the Mortgage  Investments  funded  using the line of credit  generate
revenue for the Partnership. As of December 31, 1999, the Partnership is current
with its interest  payments on the line of credit.  For the years ended December
31, 1997,  1998 and 1999,  interest  paid was  $198,316,  $170,867 and $182,350,
respectively,  reflecting an overall  average  utilization of the credit line of
approximately $2,200,000, with an average variance of $325,000.

The Partnership's income and expenses, accruals and delinquencies are within the
normal range of the General Partners' expectations,  based upon their experience
in  managing  similar  Partnerships  over the last  twenty-two  years.  Mortgage
Servicing  Fees  increased  in 1998 to $128,493,  and in 1999 to $127,440,  from
$83,559 in 1997  chiefly due to an increase  during the 1998 year of the monthly
loan service fee to 1/12% (1% per year). Asset Management Fees increased in 1999
from $0 in 1997 to $16,141 in 1998, and to $44,524 in 1999. In 1997, the General
Partners  waived or  partially  waived  this fee to the  Partnership.  All other
expenses  flucuated  in a very close range except for Interest on Note Payable -
bank and  Provision  for Doubtful  Accounts  and losses on Real Estate  acquired
through foreclosure each discussed  elsewhere in this Management  Discussion and
Analysis  of   Financial   Condition   and  Results  of   Operations.   Borrower
foreclosures,  as set forth under Results of Operations,  are a normal aspect of
Partnership  operations and the General  Partners  anticipate that they will not
have a material effect on liquidity. As of December 31, 1999, there was only one
property in  foreclosure.  Cash is  constantly  being  generated  from  interest
earnings,  late  charges,   pre-payment  penalties,   amortization  of  Mortgage
Investments  and  pay-off on notes.  Currently,  cash flow  exceeds  Partnership
expenses,  earnings and capital  payout  requirements.  Excess cash flow will be
invested in new Mortgage Investment opportunities when available, used to reduce
the Partnership credit line or other Partnership business.

The  General  Partners  regularly  review  the  Mortgage  Investment  portfolio,
examining the status of delinquencies,  the underlying collateral securing these
properties,  the REO expenses and sales  activities,  borrowers payment records,
etc.  Data on the local real estate market and on the national and local economy
are  studied.  Based upon this  information  and other data,  loss  reserves are
increased  or  decreased.  Because  of the  number of  variables  involved,  the
magnitude of the possible swings and the General  Partners  inability to control
many of these factors,  actual results may and do sometimes differ significantly
from  estimates  made by the General  Partners.  Management  provided  $434,495,
$423,054  and $329,057 as  provision  for doubtful  accounts for the years ended
December 31,  1997,  1998 and 1999,  respectively.  The  provision  for doubtful
accounts was decreased $11,441 to $423,054 in 1998 and by $93,997 to $329,057 in
1999.  These  decreases  reflect  reduced  expected REO  anticipated  losses and
improved collections of secured and unsecured receivables.

The  February  18,  2000  issue of the  "Alert"  publication,  published  by the
California Chamber of Commerce,  said the following about California's  thriving
economy:

"Job  gains  grew in the  fourth  quarter  of 1999,  as the  California  economy
accelerated.  For  the  year  as  a  whole,  employment  grew  by  2.9  percent,
considerably  stronger  than in the  nation.  This gain  likely  will be revised
upward to 3.3 percent,  or so, in the benchmark revisions to be released in late
February.

State  unemployment,  at 4.9 percent in the last four  months,  is lower than in
more than 30 years. Tax revenues are flooding into  Sacramento,  in part because
of the strong  economy,  but also because of  exercised  stock  options,  strong
bonuses and huge realized stock market gains.


<PAGE>



The state economy's  strength has been widespread across major  industries,  but
concern about residential real estate is growing.

Housing permits were issued at an annual rate of 139,000 units through  November
1999, well below almost  everyone's  expectations and the 220,000 units averaged
annually in the 1980s. Clearly, not enough housing is being built in the state.

High land prices,  restrictive local land use policies,  the re-emergence of the
slow  growth/no  growth  movement,  and federal  environmental  regulations  are
constraining  home  building.  As a result,  affordability  is  declining  at an
alarming rate.

The  affordability of existing homes is low in San Diego and Orange counties and
extremely  low almost  everywhere  in the San  Francisco Bay Area. In what seems
like a paradox,  an oversupply of expensive new homes is  developing.  This also
happened under similar circumstances in the late 1980s.

In areas of particularly high land prices and long permitting and other building
delays,  building entry and mid-level  housing becomes more difficult to "pencil
out".  As  developers  turn  increasingly  to expensive  housing,  the supply of
expensive  housing can quickly outstrip demand.  Also, the  affordability of new
homes can dip considerably below that of existing homes.

In Orange County,  for example,  a relatively low 32 percent of households could
afford to buy the median-priced existing home sold in November;  only 19 percent
could afford to buy the median-priced new home."

To the  Partnership,  the above  evaluation of the  California  economy means an
increase in property values, job growth, personal income growth, etc., which all
translates  into  more  loan  activity,  which of  course,  is  healthy  for the
Partnership's lending activity.

The  Partnership's  interest in land located in East Palo Alto, Ca, was acquired
through foreclosure.  The investment was previously  classified as Investment in
Partnership  in the Financial  Statements  and has been  reclassified  into Real
Estate Owned. The Partnership's basis of $9,039, $ 0, and $346,017 for the years
ended  December 31, 1999,  1998 and 1997,  respectively,  has been invested with
that of two other  Partnerships.  The Partnership had been attempting to develop
property  into  an  approximately  63  units   residential   subdivision,   (the
"Development"). The proposed Development had gained significant public awareness
as a result of certain  environmental,  fish and  wildlife,  density,  and other
concerns.  Incorporated  into the proposed  Development were various  mitigation
measures  which  included  remediation  of  hazardous  material  existing on the
property, and protection of potentially affected species due to the proximity of
the property to the San  Francisco  Baylands.  These  issues and others  sparked
significant public controversy.  Opposition against and support for the proposed
Development existed. Among those in opposition to the project was Rhone Poulanc,
Inc. which is responsible for a nearby hazardous waste site. Rhone Poulanc, Inc.
has been identified as the Responsible Party for the Arsenic Contamination which
affected a portion of the property. On May 8, 1998, the Partnership, in order to
resolve  disputes  which  arose  during  the  course of the  attempts  to obtain
entitlements for this Development,  entered into agreements with  Rhone-Poulanc,
Inc which among other things,  restricted the property to non residential  uses,
provided  for  appropriate  indemnification  and included  other  considerations
including  a cash  payment to the  Partnership.  The  Partnership  has  retained
ownership  of the  property,  which is  subject to  various  deed  restrictions,
options and or first  rights of refusal.  The General  Partners are pleased with
this outcome to the residential  development  attempt.  The General Partners may
now explore other  available  options with respect to  alternative  uses for the
property. In order to pursue these options,  rezoning of the property's existing
residential  zoning   classification  will  be  required.   The  Partnership  is
continuing to explore  remediation  options  available to mitigate the pesticide
contamination, which affects the property.


<PAGE>


This pesticide contamination appears to be the result of agricultural operations
by prior  owners,  and is  unrelated  to the  Arsenic  Contamination  for  which
Rhone-Poulanc,  Inc. remains responsible. The General Partners do not believe at
this time that  remediation of the pesticide  contaminants  will have a material
adverse effect on the financial condition of the Partnership.

At the  time  of  subscription  to the  Partnership,  Limited  Partners  made an
irrevocable decision to either take distributions of earnings monthly, quarterly
or annually or to compound  earnings  in their  capital  account.  For the years
ended December 31, 1997, 1998 and 1999, the Partnership  made  distributions  of
earnings to Limited Partners after allocation of syndication costs of, $399,379,
$456,358  and  $490,841,  respectively.  Distribution  of  Earnings  to  Limited
Partners after allocation of syndication  costs for the years ended December 31,
1997, 1998 and 1999 to Limited  Partners' capital accounts and not withdrawn was
$419,231, $381,747 and $409,644, respectively. As of December 31, 1997, December
31 1998 and December 31, 1999,  Limited Partners  electing to withdraw  earnings
represented 53%, 54% and 53% of the Limited Partners capital.

The  Partnership  also allows the Limited  Partners  to withdraw  their  capital
account  subject  to  certain   limitations  (see   liquidation   provisions  of
Partnership  Agreement).  For the years ended December 31, 1997,  1998 and 1999,
$475,348,  $381,458 and $231,025, were liquidated subject to the 10% penalty for
early withdrawal.  These  withdrawals are within the normally  anticipated range
that the General  Partners  would expect in their  experience  in this and other
partnerships.  The General  Partners  expect that a small  percentage of Limited
Partners will elect to liquidate their capital accounts over one year with a 10%
early withdrawal penalty. In originally conceiving the Partnership,  the General
Partners wanted to provide  Limited  Partners  needing their capital  returned a
degree of liquidity.  Generally,  Limited Partners electing to withdraw over one
year need to liquidate  investment to raise cash.  The trend the  Partnership is
experiencing in withdrawals by Limited Partners  electing a one year liquidation
program  represents a small percentage of Limited Partner capital as of December
31, 1997, December 31, 1998 and December 31, 1999,  respectively and is expected
by the General Partners to commonly occur at these levels.

Additionally,  for the years ended  December  31,  1997,  December  31, 1998 and
December  31, 1999,  $737,568,  $1,019,017  and  $1,205,917  respectively,  were
liquidated  by Limited  Partners who have elected a  liquidation  program over a
period of five years or longer.  This  ability to  withdraw  after five years by
Limited Partners has the effect of providing Limited Partner liquidity which the
General  Partners  then  expect  a  portion  of the  Limited  Partners  to avail
themselves  of.  This has the  anticipated  effect of the  Partnership  growing,
primarily  through  reinvestment  of  earnings in years one  through  five.  The
General Partners expect to see increasing numbers of Limited Partner withdrawals
in years five through eleven,  at which time the bulk of those Limited  Partners
who have sought withdrawal have been liquidated.  After year eleven, liquidation
generally subsides and the Partnership capital again tends to increase.

     Actual  liquidation  of both  capital  and  earnings  from year five (1994)
through year ten (1999) is shown hereunder:

                                 Years ended December 31,

                             1994                 1995                  1996
                   ---------------       --------------        --------------
Earnings                 $263,206             $270,760              $336,341
Capital                 *$340,011            *$184,157             *$722,536
                   ---------------       --------------        --------------
Total                    $603,217             $454,917            $1,058,877
                   ===============       ==============        ==============

                             1997                 1998                  1999
                   ---------------       --------------        --------------
Earnings                 $399,379             $456,358              $490,841
Capital               *$1,212,916          *$1,400,475           *$1,436,942
                   ---------------       --------------        --------------
Total                  $1,612,295           $1,856,833            $1,927,783
                   ===============       ==============        ==============

* These amounts represent gross of early withdrawal penalties.


<PAGE>



         The Year 2000 was  considered  by most to be a challenge for the entire
world with respect to the conversion of existing  computerized  operations.  The
Partnership relies on Redwood Mortgage Corp., third parties and various software
vendors for its hardware and software  needs.  Since year 2000 has come, we have
not experienced any computer hardware breakdowns. We assume that our testing and
upgrading of computer  hardware prior to year 2000 identified all hardware areas
of concern.  Computer  software  programs  are all  operational  with only minor
problems  being  experienced  with  some  programs.  These  problems  are  being
addressed  by the  appropriate  software  vendors or software  programmers.  All
quarterly  and  annual  computerized  functions  have not yet been run,  however
testing of the  operations  has taken  place.  We do not expect any  significant
problems.

         The costs of updating our computer systems were substantially  borne by
the non affiliated  software vendors and the in house system conversion costs to
the partnership were marginal.

         Year 2000  issues do not appear to have  affected,  in any  significant
manner, any industries or businesses in the marketplace in which the Partnership
places its loans. We believe that year 2000 issues are a non-event and will have
little if any future effect on the Partnership, its affiliates or the people and
businesses with which it associates.

         The  foregoing  analysis of year 2000 issues  includes  forward-looking
statements  and  predictions  about  possible  or  future  events,   results  of
operations,  and  financial  condition.  As such,  this analysis may prove to be
inaccurate  because of  assumptions  made by the general  partners or the actual
development  of  future  events.  No  assurance  can be given  that any of these
statements or predictions  will ultimately  prove to be correct or substantially
correct.


<PAGE>


                           Item 8 - Financial Statements and Supplementary Data

Redwood  Mortgage  Investors  VII, a California  Limited  Partnership's  list of
Financial Statements and Financial Statement schedules:

A-Financial Statements

The  following  financial  statements  of  Redwood  Mortgage  Investors  VII are
included in Item 8:

o             Independent Auditor's Report,
o Balance  Sheets - December  31, 1999,  and December 31, 1998, o Statements  of
Income for the three years ended  December 31, 1999, o Statements  of Changes in
Partners'  Capital for the three years ended  December 31, 1999, o Statements of
Cash Flows for the three years ended  December  31,  1999,  o Notes to Financial
Statements - December 31, 1999.

B-Financial Statement Schedules

The following  financial  statement  schedules of Redwood Mortgage Inventors VII
are included in Item 8.

o        Schedule II     Amounts receivable from related parties and
                         underwriters, promoters, and employees other than
                         related parties
o        Schedule VIII   Valuation of Qualifying Accounts
o        Schedule IX     Short Term Borrowings
o        Schedule XII    Mortgage loans on real estate

All other  schedules for which  provision is made in the  applicable  accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII

                       (A California Limited Partnership)

                              FINANCIAL STATEMENTS

                                DECEMBER 31, 1999

                         (With Auditor's Report Thereon)


<PAGE>


                        Caporicci, Cropper & Larson, LLP

                          CERTIFIED PUBLIC ACCOUNTANTS

                            1575 Treat Blvd. Ste. 208

                             Walnut Creek, CA 94598

                                 (925) 932-3860

                          INDEPENDENT AUDITOR'S REPORT

THE PARTNERS
REDWOOD MORTGAGE INVESTORS VII

We have  audited  the  financial  statements  and related  schedules  of REDWOOD
MORTGAGE  INVESTORS VII (A California Limited  Partnership)  listed in Item 8 on
form 10-K  including  balance  sheets as of  December  31, 1999 and 1998 and the
statements of income,  changes in partners' capital and cash flows for the three
years ended December 31, 1999. These financial statements are the responsibility
of the Partnership's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of REDWOOD MORTGAGE INVESTORS VII
as of December  31, 1999 and 1998,  and the results of its  operations  and cash
flows for the three years ended  December 31, 1999 in conformity  with generally
accepted  accounting  principles.  Further, it is our opinion that the schedules
referred to above present fairly the information set forth therein in compliance
with the  applicable  accounting  regulations  of the  Securities  and  Exchange
Commission.

                                /s/ Bruce Cropper

                        Caporicci, Cropper & Larson, LLP

Walnut Creek, California
March 15, 2000


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII

                       (A California Limited Partnership)

                                 BALANCE SHEETS

                           DECEMBER 31, 1999 AND 1998

                                     ASSETS

                                                        1999                1998
                                             ----------------     --------------
                                                     $388,770           $461,544
                                             ----------------     --------------

Accounts receivable:
  Mortgage Investments, secured by deeds of trust  11,011,660         13,209,186
  Accrued Interest on Mortgage Investments            357,177            442,350
  Advances on Mortgage Investments                     31,669             39,733
  Accounts receivables, unsecured                     163,085            242,493
                                             ----------------     --------------
                                                   11,563,591         13,933,762
  Less allowance for doubtful accounts                828,563            787,042
                                             ----------------     --------------
                                                   10,735,028         13,146,720
                                             ----------------     --------------


Real estate in process of acquisition, to be sold     525,510                  0
Real estate owned, acquired through foreclosure,
    held for sale                                     307,931            397,396
                                             ----------------     --------------
                                                  $11,957,239        $15,292,524
                                             ================     ==============

                        LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Notes payable - bank line of credit                $800,000         $1,912,663
  Accounts payable and accrued expenses                32,234             12,547
  Deferred Interest                                   115,709            131,743
                                              ---------------     --------------
                                                      947,943          2,056,953
                                              ---------------     --------------

Partners' Capital

  Limited partners' capital, subject to redemption (Note 4E):
     Net of Formation Loan receivable of $165,499 and $253,387 for
     1999 and 1998, respectively
                                                   10,997,318         11,936,729

  General partners' capital,                           11,978             11,978
                                              ---------------     --------------
     Total Partners' Capital                       11,009,296         11,948,707
                                              ---------------     --------------

     Total Liabilities and Partners' Capital      $11,957,239        $14,005,660
                                              ===============     ==============

See accompanying notes to financial statements.


<PAGE>
<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII

                       (A California Limited Partnership)

                              STATEMENTS OF INCOME

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

                                                                             YEARS ENDED DECEMBER 31,

                                                                ----------------------------------------------------
<S>                                                                 <C>                 <C>                <C>
                                                                    1999                1998               1997
                                                                -------------       -------------      -------------
Revenues:
  Interest on Mortgage Investments                                $1,634,416          $1,625,573         $1,593,335
  Interest on bank deposits                                            6,813               7,465              7,882
  Late charges                                                        14,367              13,632              8,598
  Other                                                                7,649              11,058             14,048
                                                                -------------       -------------      -------------
                                                                -------------       -------------      -------------
                                                                   1,663,245           1,657,728          1,623,863
                                                                -------------       -------------      -------------

Expenses:
  Mortgage servicing fees                                            127,440             128,493             83,559
  Interest on note payable - bank                                    182,350             170,867            198,316
  Clerical costs through Redwood Mortgage                             30,367              34,173             37,760
  Asset management fee                                                44,524              16,141                  0
  Provision for doubtful accounts and losses
       on real estate acquired through foreclosure                   329,057             423,054            434,495
  Professional services                                               21,521              19,983             25,107
  Printing, supplies and postage                                      12,554              12,326             11,997
  Other                                                                5,851               6,120              5,750
                                                                -------------       -------------      -------------
                                                                     753,664             811,157            796,984
                                                                -------------       -------------      -------------


Net Income                                                          $909,581            $846,571           $826,879
                                                                =============       =============      =============

Net income:  To General Partners(1%)                                  $9,096              $8,466             $8,269
                     To Limited Partners (99%)                       900,485             838,105            818,610
                                                                -------------       -------------      -------------
                                                                    $909,581            $846,571           $826,879
                                                                =============       =============      =============

Net income per $1,000 invested by Limited Partners for entire period:

     -where income is reinvested and  compounded                         $79                 $67                $61
                                                                =============       =============      =============

     -where partner receives income in monthly distributions             $76                 $65                $59
                                                                =============       =============      =============



See accompanying notes to financial statements.
</TABLE>


<PAGE>
<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII

                       (A California Limited Partnership)

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

                                                         PARTNERS' CAPITAL

                                          -----------------------------------------------------
                                                       LIMITED PARTNERS' CAPITAL

                                          -----------------------------------------------------

                                             Capital
                                             Account-          Formation
                                             Limited              Loan
                                            Partners           Receivable             Total
                                          ---------------    ---------------     --------------

<S>                                          <C>                 <C>               <C>
Balances at December 31, 1996                $14,002,529         $(429,163)        $13,573,366

Formation Loan collections                             0             60,223             60,223
Net income                                       818,610                  0            818,610
Early withdrawal penalties                      (40,258)             27,665           (12,593)
Partners' withdrawals                        (1,572,037)                  0        (1,572,037)
                                          ---------------    ---------------     --------------

Balances at December 31, 1997                $13,208,844          $(341,275        $12,867,569

Formation Loan collections                             0             66,908             66,908
Net Income                                       838,105                  0            838,105
Early withdrawal penalties                      (30,529)             20,980            (9,549)
Partners' withdrawals                        (1,826,304)                  0        (1,826,304)
                                          ---------------    ---------------     --------------

Balances at December 31, 1998                $12,190,116         $(253,387)        $11,936,729

Formation Loan collections                             0             75,138             75,138
Net Income                                       900,485                  0            900,485
Early withdrawal penalties                      (18,553)             12.750            (5,803)
Partners' withdrawals                        (1,909,231)                  0        (1,909,231)
                                          ---------------    ---------------     --------------

Balances at December 31, 1999                $11,162,817         $(165,499)        $10,997,318
                                          ===============    ===============     ==============



See accompanying notes to financial statements
</TABLE>


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

                                PARTNERS' CAPITAL
                     -------------------------------------------------
                           GENERAL PARTNERS' CAPITAL

                     -------------------------------------------------
                                         Capital Account
                                        General Partners       Total Partners'
                                                                   Capital
                                       ------------------    -------------------

Balances at December 31, 1996                     $11,978            $13,585,344

Formation Loan collections                              0                 60,223
Net income                                          8,269                826,879
Early withdrawal penalties                              0               (12,593)
Partners' withdrawals                             (8,269)            (1,580,306)
                                       ------------------    -------------------

Balances at December 31, 1997                     $11,978            $12,879,547

Formation Loan collections                              0                 66,908
Net income                                          8,466                846,571
Early withdrawal penalties                              0                (9,549)
Partners' withdrawals                             (8,466)            (1,834,770)
                                       ------------------    -------------------

Balances at December 31, 1998                     $11,978            $11,948,707

Formation Loan collections                              0                 75,138
Net income                                          9,096                909,581
Early withdrawal penalties                              0                (5,803)
Partners' withdrawals                             (9,096)            (1,918,327)
                                       ------------------    -------------------

Balances at December 31, 1999                     $11,978            $11,009,296
                                       ==================    ===================


See accompanying notes to financial statements



<PAGE>
<TABLE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)

                            STATEMENTS OF CASH FLOWS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

                                                                                  YEARS ENDED DECEMBER 31,

                                                                     ---------------------------------------------------

<S>                                                                         <C>                 <C>               <C>
                                                                            1999                1998              1997
                                                                        --------------     ---------------    --------------
Cash flows from operating activities:

  Net income                                                                 $909,581            $846,571          $826,879
  Adjustments to reconcile net income to net cash provided by
      operating activities:
    Provision for doubtful accounts                                           332,013             362,304           374,499
    Provision for losses on real estate held for sale                         (2,956)              60,750            59,996
    Early withdrawal penalty credited to income                               (5,803)             (9,549)          (12,593)
    (Increase) decrease in accrued interest & advances                       (62,310)            (20,977)         (155,408)
    Increase (decrease) in accounts payable and accrued expenses               19,687              10,702               373
    Increase (decrease) in deferred interest on Mortgage Investments         (16,034)              62,427          (85,282)
                                                                        --------------     ---------------    --------------

      Net cash provided by operating activities                             1,174,178           1,312,228         1,008,464
                                                                        --------------     ---------------    --------------

Cash flows from investing activities:

    Principal collected on mortgage investments                             9,314,140           6,529,324         6,278,832
    Mortgage Investments made                                             (7,716,617)         (6,398,769)       (7,841,128)
    Additions to Real Estate held for sale                                   (14,111)             323,720         (202,645)
    Dispositions of Real Estate held for sale                                 106,532            (55,532)           979,115
    Proceeds from Partnership                                                       0             522,212                 0
    Investment in Partnership                                                       0           (105,390)         (103,623)
    Proceeds from unsecured Accounts Receivable                                18,956               9,929                 0
                                                                        --------------     ---------------    --------------
      Net cash provided by (used in) investing activities                   1,708,900             825,494         (889,449)
                                                                        --------------     ---------------    --------------

Cash flows from financing activities:

  Net increase (decrease) in note payable-bank                            (1,112,663)           (429,153)         1,166,816
  Formation loan collections                                                   75,138              66,908            60,223
  Partners withdrawals                                                    (1,918,327)         (1,834,770)       (1,580,306)
                                                                        --------------     ---------------    --------------
      Net cash provided by (used in) financing activities                 (2,955,852)         (2,197,015)         (353,267)
                                                                        --------------     ---------------    --------------

Net increase (decrease) in cash                                              (72,774)            (59,293)         (234,252)
Cash - beginning of period                                                    461,544             520,837           755,089
                                                                        --------------     ---------------    --------------
Cash - end of period                                                         $388,770            $461,544          $520,837
                                                                        ==============     ===============    ==============

See accompanying notes to financial statements.
</TABLE>

<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1999

NOTE 1 - ORGANIZATION AND GENERAL

Redwood  Mortgage  Investors VII, (the  "Partnership")  is a California  Limited
Partnership,  of which the General Partners are D. Russell  Burwell,  Michael R.
Burwell and Gymno  Corporation,  a California  corporation owned and operated by
the individual  General  Partners.  The  Partnership  was organized to engage in
business  as a  mortgage  lender  for the  primary  purpose  of making  Mortgage
Investments  secured  by  Deeds of Trust on  California  real  estate.  Mortgage
Investments  are being  arranged  and  serviced by Redwood  Mortgage  Corp.,  an
affiliate of the General Partners.  At September 30, 1992, the offering had been
closed with contributed capital totalling $11,998,359 for limited partners.

A minimum of 2,500 units ($250,000) and a maximum of 120,000 units ($12,000,000)
were offered through  qualified  broker-dealers.  As Mortgage  Investments  were
identified, partners were transferred from applicant status to admitted partners
participating  in  Mortgage  Investment  operations.   Each  month's  income  is
allocated to partners based upon their  proportionate share of partners capital.
Some partners have elected to withdraw income on a monthly,  quarterly or annual
basis.

A. Sales Commissions - Formation Loan

Sales commissions ranging from 0% (Units sold by General Partners) to 10% of the
gross proceeds were paid by Redwood  Mortgage Corp., an affiliate of the General
Partners  that  arranges and services the Mortgage  Investments.  To finance the
sales  commissions,  the Partnership was authorized to loan to Redwood  Mortgage
Corp.  an amount  not to exceed  8.3% of the gross  proceeds  provided  that the
Formation  Loan  for the  minimum  offering  period  could  be 10% of the  gross
proceeds for that period.  The Formation  Loan is unsecured and is being repaid,
without  interest,  in ten  installments  of  principal,  over a ten year period
commencing  January 1, 1992. At December 31, 1992,  Redwood  Mortgage  Corp. had
borrowed  $914,369 from the Partnership to cover sales  commissions  relating to
$11,998,359 limited partner  contributions  (7.62%).  Through December 31, 1999,
$748,870  including  $136,873  in early  withdrawal  penalties,  had been repaid
leaving  a  balance  of  $165,499.  The  Formation  Loan,  which  is due from an
affiliate of the General  Partners',  has been deducted  from Limited  Partners'
capital in the balance  sheet.  As amounts are collected  from Redwood  Mortgage
Corp., the deduction from capital will be reduced.

B. Other Organizational and Offering Expenses

Organizational and offering expenses,  other than sales commissions,  (including
printing costs, attorney and accountant fees, and other costs), were paid by the
Partnership.  Such  costs  were  limited  to 10% of the  gross  proceeds  of the
offering or $500,000  whichever was less.  The General  Partners were to pay any
amount of such expenses in excess of 10% of the gross proceeds or $500,000.

Organization costs of $10,102 and syndication costs of $415,692 were incurred by
the  Partnership.  The sum of  organization  and  syndication  costs,  $425,794,
approximated 3.55% of the gross proceeds  contributed by the Partners.  Both the
Organization  and  Syndication  Costs have been fully amortized and allocated to
the Partners.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Accrual Basis

Revenues and  expenses  are  accounted  for on the accrual  basis of  accounting
wherein  income is recognized as earned and expenses are recognized as incurred.
Once a loan is categorized as impaired, interest is no longer accrued thereon.

B. Management Estimates

In preparing the financial statements,  management is required to make estimates
based on the  information  available that affect the reported  amounts of assets
and  liabilities  as of the balance sheet date and revenues and expenses for the
related periods.  Such estimates relate  principally to the determination of the
allowance for doubtful  accounts,  including the valuation of impaired  mortgage
investments,  and the  valuation of real estate  acquired  through  foreclosure.
Actual results could differ significantly from these estimates.

C. Mortgage Investments, Secured by Deeds of Trust

The Partnership has both the intent and ability to hold the Mortgage Investments
to maturity,  i.e., held for long-term investment.  They are therefore valued at
cost for financial statement purposes with interest thereon being accrued by the
simple interest method.

Financial  Accounting  Standards Board Statements  (SFAS) 114 and 118 (effective
January 1, 1995) provide that if the probable  ultimate recovery of the carrying
amount of a mortgage  investment,  with due  consideration for the fair value of
collateral, is less than the recorded investment, and related amount due and the
impairment is considered to be other than temporary,  the carrying amount of the
investment  (cost)  shall be reduced to the present  value of future cash flows.
The adoption of these statements did not have a material effect on the financial
statements  of the  Partnership  because that was  substantially  the  valuation
method previously used on impaired Mortgage Investments..

At  December  31,  1999,  1998 and  1997,  reductions  in the  cost of  Mortgage
Investments  categorized  as  impaired  by the  Partnership  totalled  $152,231,
$38,634, and $0, respectively. The reduction in stated value was accomplished by
increasing the allowance for doubtful accounts.

As presented in Note 10 to the financial statements as of December 31, 1999, the
average mortgage investment to appraised value of security at the time the loans
were consummated was 62.42%. When a loan is valued for impairment  purposes,  an
updating is made in the valuation of collateral  security.  However,  such a low
loan to value ratio tends to minimize reductions for impairment.

D. Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents  include
interest bearing and non-interest bearing bank deposits.

E. Real Estate Owned, Held for Sale

Real  estate  owned,  held for  sale,  includes  real  estate  acquired  through
foreclosure,  and is  stated  at the  lower of the  recorded  investment  in the
property,  net of any senior  indebtedness,  or at the property's estimated fair
value,  less estimated  costs to sell. At December 31, 1999, one property was in
the  process  of  becoming  Real  Estate  owned.  It was valued at fair value of
$525,510  based on a current  appraisal.  The  $525,510 is net of a reduction in
value of $230,040.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

The  following  schedule  reflects  the costs of real  estate  acquired  through
foreclosure and the recorded reductions to estimated fair values, less estimated
costs to sell as of December 31, 1999 and 1998, not including the aforementioned
real estate in process of acquisition:

                                                    December 31,
                                 -----------------------------------------------
                                        1999                            1998
                                 --------------                 ----------------

Costs of properties                    $427,151                         $765,986
Reduction in value                    (119,220)                        (348,590)
REO prior lien                                0                         (20,000)
                                 --------------                 ----------------

Fair value reflected in financial
statements                             $307,931                         $397,396
                                 ==============                 ================

Effective  January 1, 1996, the Partnership  adopted the provisions of statement
No 121 (SFAS 121) of the Financial Accounting  Standards Board,  "Accounting for
the  Impairment  of Long Lived  Assets and for Long Lived  Assets to be disposed
of".  The  adoption  of  SFAS  121  did  not  have  a  material  impact  on  the
Partnership's  financial position because the methods indicated were essentially
those previously used by the Partnership.

F. Income Taxes

No  provision  for  Federal  and  State  income  taxes is made in the  financial
statements  since  income taxes are the  obligation  of the partners if and when
income taxes apply.

G. Organization and Syndication Costs

The Partnership  bears its own  organization  and syndication  costs (other than
certain  sales  commissions  and  fees  described  above)  including  legal  and
accounting expenses,  printing costs, selling expenses, a 1% wholesale brokerage
fee and filing fees.  Organizational  costs of $10,102 were capitalized and were
amortized  over a five year period.  Syndication  costs of $415,692 were charged
against partners' capital and were allocated to individual  partners  consistent
with the Partnership Agreement.

H. Allowance for Doubtful Accounts

Mortgage  Investments  and the related accrued  interest,  fees and advances are
analyzed on a continuous basis for recoverability.  Delinquencies are identified
and followed as part of the Mortgage  Investment system. A provision is made for
doubtful accounts to an amount considered by management to be adequate, with due
consideration  to  collateral  value,  to  provide  for  unrecoverable  accounts
receivable, including impaired mortgage investments, other mortgage investments,
accrued  interest  and  advances on  mortgage  investments,  and other  accounts
receivable  (unsecured).  The composition of the allowance for doubtful accounts
as of December 31, 1999 and 1998 was as follows:


<PAGE>




                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

                                                     December 31,
                                       -----------------------------------------
                                           1999                        1998
                                       ---------------          ----------------

Impaired mortgage investments            $152,231                    $38,634
Unspecified mortgage investments          598,803                    606,299
Accounts receivable, unsecured             77,529                    142,109
                                       ---------------          ----------------
                                         $828,563                   $787,042
                                       ===============          ================

I. Net Income Per $1,000 Invested

Amounts  reflected in the statements of income as net income per $1,000 invested
by Limited  Partners  for the entire  period are  actual  amounts  allocated  to
Limited  Partners  who have  their  investment  throughout  the  period and have
elected to either  leave their  earnings to compound or have  elected to receive
monthly  distributions of their net income.  Individual income is allocated each
month  based on the  Limited  partners'  pro rata  share of  Partners'  Capital.
Because the net income percentage varies from month to month, amounts per $1,000
will vary for those  individuals  who made or  withdrew  investments  during the
period,  or select other  options.  However,  the net income per $1,000  average
invested  has  approximated  those  reflected  for those whose  investments  and
options have remained constant.


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

NOTE 3 - GENERAL PARTNERS AND RELATED PARTIES

The  following  are  commissions  and/or  fees which will be paid to the General
Partners and/or related parties.

A. Mortgage Brokerage Commissions

Redwood Mortgage Corp.  receives mortgage brokerage  commissions for services in
connection with the review, selection, evaluation,  negotiation and extension of
Mortgage  Investments  in an  amount  up to 12% of the  principal  amount of the
Mortgage  Investments  through the period ending 6 months after the  termination
date of the offering.  Thereafter,  commissions  are limited to an amount not to
exceed 4% of the total Partnership assets per year. Such commissions are paid by
the borrowers,  and are not an expense to the  Partnership.  Loan brokerage fees
for 1999, 1998, and 1997, totaled $207,739, $166,752 and $83,559, respectively.

B. Mortgage Servicing Fees

Redwood Mortgage Corp. also receives  monthly  mortgage  servicing fees of up to
1/8 of 1% (1.5%  annual) of the unpaid  principal,  or such lesser  amount as is
reasonable and customary in the geographic area where the property  securing the
Mortgage  Investment is located.  Mortgage servicing fees of $127,440,  $128,493
and $83,559 were incurred for years 1999, 1998 and 1997, respectively.

C. Asset Management Fee

The  General  Partners  receive a monthly  fee for  managing  the  Partnership's
Mortgage  Investment  portfolio  and  operations of up to 1/32 of 1% of the "net
asset value" (3/8 of 1% annual).  Asset management fees were $44,524 and $16,141
during 1999 and 1998, respectively. No management fees were incurred for 1997 .

D. Other Fees

The Partnership Agreement provides for other fees such as reconveyance, Mortgage
assumption and Mortgage  extension fees. Such fees are incurred by the borrowers
and are paid to parties related to the General Partners.

E. Income and Losses

All income is credited  or charged to  partners in relation to their  respective
partnership  interests.   The  partnership  interest  of  the  General  Partners
(combined) is a total of 1%.


<PAGE>



                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

F. Operating Expenses

The General Partners or their affiliate  (Redwood Mortgage Corp.) are reimbursed
by the  Partnership  for all  operating  expenses  actually  incurred by them on
behalf of the Partnership,  including without limitation,  out-of-pocket general
and administration expenses of the Partnership, accounting and audit fees, legal
fees and expenses,  postage and preparation of reports to Limited Partners. Such
reimbursements are reflected as expenses in the Statements of Income.

G. General Partners Contributions

The General Partners  collectively or severally were to contribute 1/10 of 1% in
cash  contributions  as  proceeds  from the  offering  were  admitted to limited
Partner capital.  As of December 31, 1992 a General Partner,  GYMNO Corporation,
had  contributed  $11,998,  1/10  of  1% of  limited  partner  contributions  in
accordance with Section 4.02(a) of the Partnership Agreement.

NOTE 4 - OTHER PARTNERSHIP PROVISIONS

A. Applicant Status

Subscription  funds  received from  purchasers of units were not admitted to the
Partnership until appropriate lending  opportunities were available.  During the
period  prior  to the  time of  admission,  which  ranged  between  1-120  days,
purchasers'  subscriptions  remained  irrevocable  and earned  interest at money
market  rates,  which were lower than the return on the  Partnership's  Mortgage
Investment portfolio.

Interest earned prior to admission was credited to partners in applicant status.
As Mortgage Investments were made,  applicant  subscriptions were transferred to
Limited  Partner  status to begin  sharing in income from  Mortgage  Investments
secured by deeds of trust.  The interest  earned  prior to admission  was either
paid to the  investors  or  transferred  to  Partners'  Capital  along  with the
original investment.

B. Term of the Partnership

The term of the Partnership is approximately 40 years,  unless sooner terminated
as provided. The provisions provide for no capital withdrawal for the first five
years,  subject to the  penalty  provision  set forth in (E) below.  Thereafter,
investors have the right to withdraw over a five-year period, or longer.

C. Election to Receive Monthly, Quarterly or Annual Distributions

Upon  subscriptions,  investors elected either to receive monthly,  quarterly or
annual distributions of earnings  allocations,  or to allow earnings to compound
for at least a period of 5 years.

D. Profits and Losses

Profits and losses are allocated among the Limited  Partners  according to their
respective capital accounts after 1% is allocated to the General Partners.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

E. Liquidity, Capital Withdrawals and Early Withdrawals

There are substantial  restrictions on  transferability of Units and accordingly
an investment in the Partnership is not liquid. Limited Partners had no right to
withdraw from the  Partnership or to obtain the return of their capital  account
for at least one year from the date of purchase of Units which in all  instances
had occurred as of December 31,  1999.  In order to provide a certain  degree of
liquidity to the Limited  Partners after the one-year  period,  Limited Partners
may withdraw all or part of their Capital  Accounts from the Partnership in four
quarterly  installments  beginning  on the  last  day of  the  calendar  quarter
following the quarter in which the notice of  withdrawal is given,  subject to a
10% early  withdrawal  penalty.  The 10%  penalty  is  applicable  to the amount
withdrawn early and will be deducted from the Capital Account.  Withdrawal after
the  one-year  holding  period  and  before  the  five-year  holding  period was
permitted only upon the terms set forth above.

After five years from the date of purchase of the Units.  Limited  Partners have
the right to withdraw from the Partnership,  on an installment basis,  generally
this is done over a five year period in twenty (20) quarterly installments. Once
a Limited  Partner has been in the Partnership for the minimum five year period,
no penalty  will be  imposed  if  withdrawal  is made in twenty  (20)  quarterly
installments  or longer.  Notwithstanding  the five-year (or longer)  withdrawal
period,  the General  Partners may liquidate all or part of a Limited  Partner's
capital account in four quarterly  installments beginning on the last day of the
calendar  quarter  following  the quarter in which the notice of  withdrawal  is
given. This withdrawal is subject to a 10% early withdrawal  penalty  applicable
to any sums withdrawn prior to the time when such sums could have been withdrawn
without penalty.

The Partnership will not establish a reserve from which to fund withdrawals and,
accordingly,  the  Partnership's  capacity to return a Limited Partner's capital
account is restricted to the availability of Partnership cash flow. Furthermore,
no more than 20% of the total Limited Partners' capital accounts  outstanding at
the beginning of any year, shall be liquidated during any calendar year.

F. Guaranteed Interest Rate For Offering Period

During the period  commencing with the day a Limited Partner was admitted to the
Partnership and ending 3 months after the offering termination date, the General
partners  guaranteed  an interest  rate equal to the greater of actual  earnings
from mortgage  operations  or 2% above The Weighted  Average cost of Funds Index
for  the  Eleventh  District  Savings  Institutions  (Savings  & Loan  &  Thrift
Institutions)  as  computed  by the  Federal  Home  Loan  Bank of San  Francisco
monthly, up to a maximum interest rate of 12%. The guarantee amounted to $12,855
and $5,195 in 1990 and 1991, respectively.  In 1992 and 1993, actual realization
exceeded the  guaranteed  amount each month.  Beginning  with fiscal years after
1993, the guarantee no longer applies.

NOTE 5 - LEGAL PROCEEDINGS

Legal actions against  borrowers and other involved  parties have been initiated
by the Partnership to help assure payments against unsecured accounts receivable
totalling  $163,085 at December 31, 1999. The Partnership is a defendant,  along
with numerous defendants including a developer, contractor and other lenders, in
a lawsuit involving the Partnership's attempt to recover it's investment in Real
Estate acquired through foreclosure.

Management  anticipates that the ultimate results of these cases will not have a
material  adverse  effect  on the  net  assets  of  the  Partnership,  with  due
consideration  having  been given in  arriving  at the  allowance  for  doubtful
accounts.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

NOTE 6 - NOTE PAYABLE BANK - LINE OF CREDIT

The  Partnership  has a bank line of credit  secured by its Mortgage  Investment
portfolio of up to $3,500,000 at .25% over prime. The balances outstanding as of
December 31, 1999 and 1998 were $800,000, and $1,912,663,  respectively, and the
interest rate was 8.75% (8.50% prime + .25%). This line of credit expires May 1,
2003.

NOTE 7 - INCOME TAXES

The following  reflects a  reconciliation  from net assets  (Partners'  Capital)
reflected in the financial statements to the tax basis of those net assets:

                                                     December 31,
                                      ------------------------------------------
                                               1999                   1998
                                      ---------------           ----------------

Net assets - Partners' Capital per
  financial statements                  $11,009,296               $11,948,707

Formation loan receivable                   165,499                   253,387
Allowance for doubtful accounts             828,563                   787,042
                                      ---------------           ----------------

Net assets tax basis                    $12,003,358               $12,989,136
                                      ===============           ================

In 1999,  approximately  69% of  taxable  income  was  allocated  to tax  exempt
organizations i.e.,  retirement plans. Such plans do not have to file income tax
returns unless their  "unrelated  business  income" exceeds  $1,000.  Applicable
amounts become taxable when distribution is made to participants.

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following  methods and  assumptions  were used to estimate the fair value of
financial instruments:

(a) Cash and Cash  Equivalents  - The  carrying  amount  equals fair value.  All
amounts, including interest bearing, are subject to immediate withdrawal.

(b) The Carrying Value of Mortgage Investments - (see note 2 (c) is $11,011,660.
The  December  31,  1999  fair  value of these  investments  of  $10,929,711  is
estimated  based upon projected cash flows  discounted at the estimated  current
interest rates at which similar loans would be made.  The  applicable  amount of
the allowance  for doubtful  accounts  along with accrued  interest and advances
related  thereto  should also be considered in evaluating  the fair value versus
the carrying value.


<PAGE>


                         REDWOOD MORTGAGE INVESTORS VII
                  (A California Limited Partnership) NOTES TO
                              FINANCIAL STATEMENTS
                               DECEMBER 31, 1999

NOTE 9 - ASSET CONCENTRATIONS AND CHARACTERISTICS

The Mortgage Investments are secured by recorded deeds of trust. At December 31,
1999,  there  were  42  Mortgage  Investments  outstanding  with  the  following
characteristics:

Number of Mortgage Investments outstanding                                    42
Total Mortgage Investments outstanding                               $11,011,660

Average Mortgage Investment outstanding                                 $262,182
Average Mortgage Investment as percent of total                            2.38%
Average Mortgage Investment as percent of Partners' Capital                2.38%

Largest Mortgage Investment outstanding                               $1,500,000
Largest Mortgage Investment as percent of total                           13.62%
Largest Mortgage Investment as percent of Partners' Capital               13.62%

Number of counties where security is located(all California)                  12

Largest percentage of Mortgage Investments in one county                  26.80%
Average Mortgage Investment to appraised value of security at
    time loan was consummated                                             62.53%

Number of Mortgage Investments in foreclosure                                  1


The following  categories of mortgage  investments are pertinent at December 31,
1999 and 1998:

                                                     December 31,
                                         ---------------------------------------
                                               1999                  1998
                                         -----------------      ----------------

First Trust Deeds                            $6,077,532               $8,638,976
Second Trust Deeds                            4,272,714                4,188,401
Third Trust Deeds                               661,414                  181,808
Fourth Trust Deeds                                    0                  200,001
                                         ------------------     ----------------

Total mortgage investments                   11,011,660               13,209,186
Prior liens due other lenders                10,389,233               12,728,867
                                         ------------------     ----------------

Total debt                                  $21,400,893              $25,938,053
                                         ==================     ================

Appraised property value at time of loan    $34,223,193              $42,393,561
                                         ==================     ================

Total investments as a percent of appraisals     62.53%                   61.18%
                                         ==================     ================

Investments by Type of Property
Owner occupied homes                           $340,864                 $746,334
Non-Owner occupied ho                         2,347,394                1,691,016
Apartments                                      182,675                  897,292
Commercial                                    8,140,727                9,874,544
                                         ------------------     ----------------
                                            $11,011,660              $13,209,186
                                         ==================     ================






                         REDWOOD MORTGAGE INVESTORS VII
                       (A California Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

Scheduled maturity dates of mortgage  investments as of December 31, 1999 are as
follows:

                    Year Ending
                   December 31,

                --------------------

                       2000                                         $4,734,685
                       2001                                          5,013,881
                       2002                                            263,535
                       2003                                             63,983
                       2004                                            146,616
                    Thereafter                                         788,960
                                                             ------------------
                                                                   $11,011,660
                                                             ==================

The  scheduled  maturities  for 2000 include  approximately  $1,481,528  in nine
mortgage  investments  which are past  maturity at December 31,  1999.  Interest
payments  on most of  these  loans  are  current.  $912,875  of  these  Mortgage
Investments were categorized as delinquent over 90 days.

Six mortgage  investments  with  principal  outstanding of $964,224 had interest
payments  overdue in excess of 90 days. Six Mortgage  Investments with principal
outstanding of $1,099,474 were considered impaired at December 31, 1999. That is
interest accruals are no longer recorded thereon.

The cash  balance at December  31,  1999 of $388,770  was in three banks with an
interest  bearing  balances  totalling  $332,971.  The  balances  exceeded  FDIC
insurance limits (up to $100,000 per bank) by $188,618.  The Partnership's  main
bank is the same financial  institution  that has provided the Partnership  with
the  $3,500,000  limit line of credit.  At December 31, 1999,  draw down against
this  facility was  $800,000.  As and when  deposits in the  Partnership's  bank
accounts increase  significantly  beyond the insured limit, the funds are either
placed in new  Mortgage  Investments  or used to  pay-down on the line of credit
balance.


<PAGE>

<TABLE>


         SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,

         PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES. Rule 12-03

<S>                          <C>                    <C>                <C>            <C>          <C>           <C>
Column A                     Column B               Column C            Column D                   Column E
Name of Debtor               Balance Beginning      Additions                  Deductions          Balance at end of period
                             of period 12/31/98                          (1)            (2)           (1)            (2)
                                                                       Amounts        Amounts       Current      Not Current
                                                                      collected     written off                    12/31/99
Redwood Mortgage Corp.       $253,387                  $0.00           $75,138        $12,750        $0.00         $165,499
</TABLE>


The above schedule  represents  the Formation Loan borrowed by Redwood  Mortgage
from the  Partnership  to pay for the  selling  commissions  on Units.  It is an
unsecured loan and will not bear interest. It is being repaid to the Partnership
in ten annual installments of principal only which began January 1, 1992.

* The amount written off represents the proportionate amount of early withdrawal
penalties allocated to the Formation Loan as provided for in the Prospectus.


<PAGE>
<TABLE>




                SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS

                         REDWOOD MORTGAGE INVESTORS VII

<S>                     <C>            <C>                  <C>             <C>               <C>
Column A                Column B                    Column C                Column D           Column E
Description             Balance at                  Additions               Deductions         Balance at
                                       ------------------------------------
                        beginning of          (1)                 (2)         Describe         End of Period
                        of period      Charged to          Charged to                *
                                       Costs & Expenses    Other accounts -
Year Ended

12/31/99

Deducted from
Asset accounts:

Allowance for

Doubtful accts               $787,042            $332,013                 $0       $(290,492)         $828,563
Cumulative

write-down of
Real Estate held

for sale (REO)               $348,590            $(2,956)                 $0       $(226,414)         $119,220
                        -------------- ------------------- ------------------ ---------------- ----------------

Total                      $1,135,632            $329,057                 $0       $(516,906)         $947,783
                        ============== =================== ================== ================ ================


(*) represents net loss or net (gain) on Mortgage Investments and real estate held for sale.
</TABLE>




<PAGE>


<TABLE>

                                   SCHEDULE IX
                              SHORT TERM BORROWINGS
                         REDWOOD MORTGAGE INVESTORS VII

RULE 12-10

<S>                       <C>             <C>                 <C>                   <C>                  <C>
Column A                  Column B        Column C            Column D              Column E             Column F
Category of Aggregate     Balance at End  Weighted Average    Maximum Amount        Average Amount       Weighted Average
Short-Term Borrowings     of Period       Interest Rate       Outstanding           Outstanding          Interest Rate
                                                              During the Period     During the Period    the period


Year-Ended 12/31/99          $800,000           8.35%              $3,500,000           $2,184,526             8.35%
</TABLE>






<PAGE>
<TABLE>


                                SCHEDULE XII
                      MORTGAGE INVESTMENTS ON REAL ESTATE.
                    RULE 12-29 MORTGAGE LOANS ON REAL ESTATE

<S>        <C>      <C>       <C>          <C>            <C>             <C>             <C>             <C>         <C>
Col. A     Col. B   Col. C    Col. D       Col. E         Col. F          Col. G          Col. H          Col. I      Col. J
------     ------   ------    ------       ------         ------          ------          ------          ------      ------
Descp.     Interest Final     Periodic     Prior Liens    Face Amt. of    Carrying        Principal amt   Type of     Geographic
           Rate     Maturity  Payment                     Mortgage        amount of       of Mortgage       Lien        County
                    Date      Terms                       Investments     Mortgage        Investments                   Location
                                                          (original       Investments     subject to
                                                          amount)                         Delinq. Prin.
                                                                                          or Interest

========== ======== ========= ============ ============== =============== =============== =============== ========= =============

Res          13.75  10/01/96       916.67     369,163.00       80,000.00       80,000.00            0.00   2nd Mtg     San Mateo
Res          13.75  10/01/96       988.28           0.00       86,250.00       33,950.16            0.00   1st Mtg   Santa Clara
Res          12.50  02/01/07       369.76           0.00       30,000.00       20,890.66            0.00   1st Mtg    Santa Cruz
Comm         10.00  08/06/02       400.63      17,382.00       46,803.50       42,788.08            0.00   2nd Mtg       Alameda
Res          12.00  01/10/04       150.00     208,000.00       15,000.00        2,270.65            0.00   2nd Mtg     San Mateo
Apts          6.50  05/01/06       540.83      89,904.00       75,000.00       96,716.11       13,520.15   2nd Mtg    Sacramento
Res          12.75  07/01/08       370.90     236,164.00       29,700.00       23,175.92            0.00   2nd Mtg     San Mateo
Res           8.00  05/01/09       753.50           0.00       81,825.00       60,891.46            0.00   lst Mtg       Alameda
Comm         10.00  12/01/98       647.21           0.00       73,750.00       72,766.69       72,766.69   lst Mtg    Stanislaus
Comm         10.00  12/01/98     3,619.98           0.00      412,500.00      406,541.72      406,541.72   lst Mtg       Alameda
Comm          7.00  12/01/03       575.74     281,250.00       49,586.38       40,560.78        8,636.10   2nd Mtg       Alameda
Comm         12.00  02/01/99     3,420.76           0.00      335,638.30      335,638.30      335,638.30   1st Mtg   Santa Clara
Land         12.00  07/01/96     1,352.50     679,258.00      135,250.00      135,250.00            0.00   3rd Mtg        Sonoma
Apts          7.00  02/10/05       234.06      80,250.00       40,125.00       40,125.00            0.00   2nd Mtg           San
Apts         11.50  04/01/05       453.88           0.00      550,000.00       45,833.34            0.00   1st Mtg           San
Comm          9.00  05/10/02       670.52           0.00       83,333.33       80,248.34            0.00   lst Mtg        Shasta
Land         14.00  02/01/97     3,822.50           0.00      382,250.00      235,381.46            0.00   lst Mtg   Santa Clara
Res           8.00  09/18/03        87.56           0.00       11,932.83       11,560.14            0.00   1st Mtg        Sonoma
Res           8.00  09/30/03        89.71           0.00       12,225.92       11,861.89            0.00   lst Mtg        Sonoma
Comm         12.00  02/01/99       124.00     312,000.00       12,000.00       12,000.00       12,000.00   2nd Mtg   Santa Clara
Res          13.00  12/01/99       140.83           0.00       65,000.00       13,000.00            0.00   lst Mtg       Ventura
Res          13.00  12/01/99       140.83           0.00       65,000.00       13,000.00            0.00   lst Mtg       Ventura
Res          14.00  01/01/98     1,983.34           0.00      340,000.00      170,000.00            0.00   lst Mtg       Alameda
Land         12.00  05/01/99     2,354.00           0.00      235,400.00      235,400.00            0.00   lst Mtg     San Mateo
Comm          7.00  07/01/02     1,131.11           0.00      146,666.66      140,498.54            0.00   lst Mtg  Contra Costa
Land         12.00  05/01/99       460.00     235,400.00       46,000.00       46,000.00            0.00   2nd Mtg     San Mateo
Res          12.00  05/01/99     5,773.22           0.00    1,225,000.00    1,053,447.98            0.00   lst Mtg           San
Land         11.50  09/01/99     3,833.33           0.00      400,000.00      400,000.00            0.00   lst Mtg    Stanislaus
Land         12.00  03/01/00     4,788.00           0.00      478,800.00      478,800.00            0.00   lst Mtg     San Mateo
Land         11.50  02/01/00     4,791.67           0.00      500,000.00      267,689.91            0.00   lst Mtg    Stanislaus
Res          12.00  04/01/14       306.04      22,191.00       25,500.00       25,077.08            0.00   2nd Mtg    Santa Cruz
Comm         10.50  04/01/99    14,000.00   2,929,579.00    1,600,000.00    1,500,000.00            0.00   2nd Mtg     San Mateo
Land         11.00  01/01/00     4,039.95   1,365,400.00      445,000.00      440,797.86            0.00   3rd Mtg     San Mateo
Res          12.00  05/01/00     2,196.55   1,225,000.00      219,655.17      219,655.17            0.00   2nd Mtg           San
Land         11.00  01/01/01     9,166.67     201,686.00    1,000,000.00    1,000,000.00            0.00   2nd Mtg    Stanislaus
Land         11.00  07/01/01     9,166.67     137,737.00    1,000,000.00    1,000,000.00            0.00   2nd Mtg    Stanislaus
Res           9.50  08/01/04       320.20     304,000.00       15,246.42       14,438.90            0.00   2nd Mtg     San Mateo
Res          12.00  05/01/01     2,782.54           0.00      800,000.00      328,881.51            0.00   lst Mtg        Placer
Land         11.00  11/01/00       782.52   1,141,690.00       85,365.85       85,365.85            0.00   3rd Mtg    Stanislaus
Res          11.00  11/01/04     1,238.02     553,179.00      130,000.00      129,906.87            0.00   2nd Mtg     San Mateo
Comm         10.25  12/01/01    10,121.87           0.00    1,185,000.00    1,185,000.00            0.00   lst Mtg  Contra Costa
Res          11.00  01/01/05     4,535.44           0.00      476,250.00      476,250.00            0.00   lst Mtg    Santa Cruz
                              ------------ -------------- --------------- --------------- ---------------
                              ------------ -------------- --------------- --------------- ---------------
                              $103,641.79  $10,389,233.00 $13,027,054.36  $11,011,660.37     $849,102.96

</TABLE>
<PAGE>



Notes:
         Mortgage Investments  classified as `impaired Mortgage Investments' had
         principal balances totalling  $1,099,474 at December 31, 1999. Impaired
         Mortgage  Investments  are  defined as Mortgage  Investments  where the
         costs of related balances exceeds the anticipated fair value less costs
         to collect. Accrued interest is no longer recorded thereon.

         Amounts reflected in column G (carrying amount of Mortgage Investments)
         represents both costs and the tax basis of the Mortgage Investments.


<PAGE>


Schedule XII

     Reconciliation  of carrying amount (cost) of Mortgage  Investments at close
of periods

                                         Year ended December 31,
                            ----------------------------------------------------

                                   1999               1998              1997
                             ----------------    --------------    -------------

Balance at beginning of year     $13,209,186       $13,449,741       $12,036,293
                             ----------------    --------------    -------------

Additions during period:
New Mortgage Investments           7,716,617         6,398,769         7,841,128
Other                                      0                 0                 0
                             ----------------    --------------    -------------
           Total Additions         7,716,617         6,398,769         7,841,128
                             ----------------    --------------    -------------


Deduction during period:
Collections of principal           9,314,140         6,529,324         6,278,832
Foreclosures                         400,002           110,000           148,848
Cost of Mortgage Investments sold          0                 0                 0
Amortization of Premium                    0                 0                 0
Other                                200,001                 0                 0
                             ----------------    --------------      -----------
   Total Deductions                9,914,143         6,639,324         6,427,680
                             ----------------    --------------      -----------

Balance at close of year        $11,011,660        $13,209,186       $13,449,741
                             ================    ==============      ===========


<PAGE>



            Item 9 - Changes in and Disagreements with Accountants on

                       Accounting and Financial Disclosure

A. Bruce Cropper,  a partner in the accounting firm of Parodi & Cropper has been
providing audit and accounting  services to the Partnership  since its inception
in 1993. Mr. Cropper also has been performing  audit and accounting  services to
the General  Partners of the Partnership and their affiliates for over 15 years.
In 1999, Mr. Cropper's  partner sold his portion of their practice.  Mr. Cropper
decided to merge his portion of the practice  into an existing CPA firm known as
"Caporicci & Larson" with offices in Irvine and Walnut Creek,  California.  Upon
the merging, the firm of Parodi & Cropper was dissolved,  and Caporicci & Larson
became  Caporicci,  Cropper and Larson,  LLP. As a result,  the  Partnership has
retained the firm of  Caporicci,  Cropper and Larson,  LLP, to provide its audit
and financial  services.  Thus,  although  there has been a change in accounting
firms,  there  has not been a change in  accountants  and there has not been any
disagreement  on any matter of  accounting  principles,  practices  or financial
status disclosures.

                                    Part III

          Item 10 - Directors and Executive Officers of the Registrant

     The Partnership has no Officers or Directors. Rather, the activities of the
Partnership  are managed by the three General  Partners of which two individuals
are D. Russell  Burwell and Michael R.  Burwell.  The third  General  Partner is
Gymno Corporation,  a California  corporation,  formed in 1986. The Burwells are
the two shareholders of Gymno Corporation, a California corporation, on an equal
(50-50) basis.




<PAGE>


Item 11 - Executive Compensation

COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES BY PARTNERSHIP

As indicated above in Item 10, the Partnership has no officers or directors. The
Partnership is managed by the General Partners. There are certain fees and other
items paid to management and related parties.

A  more  complete  description  of  management  compensation  is  found  in  the
Prospectus, pages 12-13, under the section "Compensation of the General partners
and the Affiliates",  which is incorporated by reference.  Such  compensation is
summarized below.

The following  compensation has been paid to the General Partners and Affiliates
for  services  rendered  during  the year  ended  December  31,  1999.  All such
compensation  is in compliance  with the guidelines and limitations set forth in
the Prospectus.

Entity Receiving
<TABLE>

<S>                         <C>                                                                  <C>
Compensation                Description of Compensation and Services Rendered                    Amount
-------------------------------------------------------------------------------------------------------

I.  Redwood Mortgage        Mortgage Servicing Fee for servicing Mortgage Investments            $127,440
    Corp.

General Partners &/or
Affiliates                  Asset Management Fee for managing assets..................            $44,524

General Partners            1% interest in profits....................................             $9,096

General Partners &/or       Portion of early withdrawal penalties applied to reduce
Affiliates                  Formation Loan............................................            $12,750

     II. FEES PAID BY  BORROWERS  ON MORTGAGE  INVESTMENTS  PLACED BY  COMPANIES
RELATED TO THE GENERAL PARTNERS WITH THE PARTNERSHIP  (EXPENSES OF BORROWERS NOT
OF THE PARTNERSHIP)

Redwood Mortgage Corp.      Mortgage Brokerage Commissions for services in connection with
                            the review, selection, evaluation, negotiation, and extension
                            of the Mortgage Investments paid by the borrowers and not by
                            the Partnership ............................................         $207,739

Redwood Mortgage Corp.      Processing and Escrow Fees for services in connection with
                            notary, document preparation, credit investigation, and escrow
                            fees payable by the borrowers and not by the Partnership....           $5,397


Gymno Corporation Inc.      Reconveyance Fee............................................           $7,075

</TABLE>

     III. IN ADDITION, THE GENERAL PARTNERS AND/OR RELATED COMPANIES PAY CERTAIN
EXPENSES ON BEHALF OF THE PARTNERSHIP FOR WHICH IT IS REIMBURSED AS NOTED IN THE
STATEMENT OF INCOME. $30,367





<PAGE>



Item 12 - Security Ownership of Certain Beneficial Owners and Management

The  General  Partners  are to own a  combined  total  of 1% of the  Partnership
including a 1% portion of income and losses.

Item 13 - Certain Relationships and Related Transactions

Refer to footnote 3 of the notes to financial statements in Part II item 8 which
describes related party fees and data.

Also refer to the  Prospectus  dated  October 20, 1989  (incorporated  herein by
reference) on page 12 "Compensation of General Partners and Affiliates" and page
14 "Conflicts of Interest".

                                     Part IV

     Item 14 - Exhibits, Financial Statements and Schedules, and Reports on Form
8-K.

     A. Documents filed as part of this report are incorporated:

     1. In Part II, Item 8 under A - Financial Statements.

     2. The Financial Statement Schedules are listed in Part II - Item 8 under B
- Financial Statement Schedules.



<PAGE>



3.  Exhibits.

   Exhibit No.            Description of Exhibits

------------------        -------------------------

         3.1              Limited Partnership Agreement

         3.2              Form of Certificate of Limited Partnership Interest
         3.3              Certificate of Limited Partnership

        10.1              Escrow Agreement
        10.2              Servicing Agreement

        10.3              (a)  Form of Note secured by Deed of Trust which
                               provides for principal and interest payments
                          (b)  Form of Note secured by Deed of Trust which
                               provides principal and interest payments and
                               right of assumption
                          (c)  Form of Note secured by Deed of Trust which
                               provides for interest only payments
                          (d)  Form of Note
        10.4              (a)  Deed of Trust and Assignment of Rents to
                               accompany Exhibits 10.3 (a), and (c)
                          (b)  Deed of Trust and Assignment of Rents
                               to accompany Exhibit 10.3 (b)
                          (c)  Deed of Trust to accompany Exhibit 10.3 (d)

        10.5              Promissory Note for Formation Loan

        10.6              Agreement to Seek a Lender

        24.1              Consent of Caporicci, Cropper & Larson,  LLP

        24.3              Consent of  Landels, Ripley & Diamond



All of these  exhibits  were  previously  filed as the exhibits to  Registrant's
Statement on Form S-11  (Registration No. 33-30427 and incorporated by reference
herein).

B.       Reports of Form 8-K.

         No reports on Form 8-K have been filed  during the last  quarter of the
period covered by this report.

C.       See A (3) above.

D. See A (2) above.  Additional  reference is made to the prospectus (S-11 filed
as part of the  Registration  Statement)  dated  October  20,  1989 to  pages 65
through 67 and  Supplement #5 dated February 14, 1992 for financial data related
to Gymno Corporation, a General Partner.


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934 the  registrant  has duly  caused  this  report  to be signed on its
behalf by the  undersigned,  thereto duly  authorized  on the 23rd day of March,
2000.

REDWOOD MORTGAGE INVESTORS VII

By:       /S/ D. Russell Burwell
          ---------------------------------------------
          D. Russell Burwell, General Partner

By:       /S/ Michael R. Burwell
          ---------------------------------------------
          Michael R. Burwell, General Partner

By:       Gymno Corporation, General Partner

          By:     /S/ D. Russell Burwell

                  ---------------------------------------------
                  D. Russell Burwell, President

          By:     /S/ Michael R. Burwell

                  ---------------------------------------------
                  Michael R. Burwell, Secretary/Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity indicated on the 23rd day of March, 2000.

Signature                                   Title                          Date

/S/ D. Russell Burwell

-----------------------------------
D. Russell Burwell                    General Partner             March 23, 2000


/S/ Michael R. Burwell

-----------------------------------
Michael R. Burwell                    General Partner             March 23, 2000



/S/ D. Russell Burwell

-----------------------------------
D. Russell Burwell           President of Gymno Corporation,      March 23, 2000
                             (Principal Executive Officer);
                             Director of Gymno Corporation


/S/ Michael R. Burwell

-----------------------------------
Michael R. Burwell           Secretary/Treasurer of Gymno         March 23, 2000
                             Corporation (Principal Financial
                             and Accounting Officer);
                             Director of Gymno Corporation